In the Simple Deposit Expansion Model,a Decline in Checkable Deposits

question 125

Multiple Choice

In the simple deposit expansion model,a decline in checkable deposits of $500 when the required reserve ratio is equal to 20 percent implies that the Fed

• A)sold $250 in government bonds.
• B)sold $100 in government bonds.
• C)sold $50 in government bonds.
• D)purchased $100 in government bonds.

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Definitions:

Currency Cross Rates

These are exchange rates between two currencies, neither of which is the domestic currency of the country where the quote is given.

CPI

The Consumer Price Index is a gauge that determines the composite weighted pricing of various consumer products and services, which encompass medical care, food, and transportation.

Base Year

A specific year against which economic or financial data is compared to measure economic performance or inflation.

Ratio

A quantitative relationship between two numbers, showing how many times one value contains or is contained in the other.